Say its at 55.00 currently.
A) You got no idea where it will go. So buy 1 lot and sell 1 lot. Wait for a big move of 200-400 pips in any direction, lets say down. wait for price starting to reverse (use TRO SR RR on a daily for example). Exit Sell with PROFIT. Price comes back to 55 you close the buy at nothing, and overall you profited from sell.

B) You believe it will go up. Ok, so Buy 2 lots, and Sell 1 lot.
1) the price goes up 200 pips, you may close all positions, thus making profit of 1 lot - spread.
2) price goes down 200 pips, and then shows signs of a reversal. You exit the Sell, profiting from that. price continues to go up and regains 55.00. You can either close the buys and overall you profited from the Sell and the Buy swaps or continue to hold the position or add a Sell and see what happens.

the bad scenario is when you exit your sell and then price continues to go down. and this is the risk, like with any trading.
Like TRO said, you need to identify your extremes right.

I make it a bit more complex, with Buy 5 lots, Sell 3 lots, if price up- profit from difference, if down- I close my Sells at TP1=150-200 pips, TP2= 400 pips, TP3= 500-600 ( a huge move unlike for GBP/JPY=) and at TP3 I buy 1 more lot and then just wait for the price to go up. I position my lots in a way, that if price goes another 500 pips down only 10-20% of my account will be at risk. So, I only risk my account if the New Zealand goes bust as a country.
TRY/JPY is also a good option.

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What is a pity is those who trade on different time frames. Say you went long the E/U on the daily sometime ago, giving some of your ongoing profit to a widening s/l. Lets say you also scalp (DTB) or even take intra day trades off the H1 for example. Now because of your D1 trade, you can only take these short time frame trades in one direction. Also you will not be able to take a trade to "hedge" the inevitable drawdown on the D1 trade without adding to your margin. ie you would have to use a separate account.

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...after July 31, 2009, First In, First Out execution will be required, which mandates that the first order in must also be the first order closed. Regulatory requirements in the United States will also likely restrict Forex Dealer Members from offering more than 100:1 leverage on major currency pairs and will be limited to 25:1 leverage on non-majors.

One trader received e-mail from his broker (FXCM) the content is as below:

The primary regulatory authority for forex in the United States, National Futures Association (NFA), has implemented new requirements that will have dramatic consequences for your MT4 account.

Hedging functionality has already been removed, and after July 31, 2009, First In, First Out execution will be required, which mandates that the first order in must also be the first order closed. Regulatory requirements in the United States will also likely restrict Forex Dealer Members from offering more than 100:1 leverage on major currency pairs and will be limited to 25:1 leverage on non-majors. FAQ, videos, and live Q&A are available in the DailyFX forums. Learn More

What does this mean for your MT4 account?

To date, we have received no indication from MetaQuotes that they will be able to comply with First In, First Out execution by July 31, 2009. As such, the combined changes brought about by NFA Compliance Rule 2-43 will mean that traders will no longer be able to trade MT4 with U.S. regulated brokers. Assuming that MetaQuotes is able to comply, there will still be major implications:

Traders will have fewer order choices
Traders will have drastic limitations to their risk management options.
The vast majority of Expert Advisors will no longer be functional
How can you avoid these changes?

To keep your current MT4 platform functionality, we recommend that you immediately fill out the FXCM UK opt-in form to have your account transferred before the regulatory changes go into effect. It is our understanding that the MT4 FXCM UK option is the ONLY solution for U.S. clients who wish to: trade with a regulated MT4 broker, maintain their MT4 platform functionality, and send funds to a U.S. bank.

FXCM UK is regulated by the Financial Services Authority (FSA) in the UK. London is the main trading center for forex in the world and the retail forex market has been regulated in the UK much longer than it has been in the U.S. Under FSA client money rules, FXCM UK accounts are fully segregated. This means client assets will not be exposed to any bankruptcy proceedings. Learn More

If you wish to transfer your trading account to FXCM UK, please complete the one page form. Account Transfer Form

DEADLINE TO COMPLETE EARLY-OPT IN: JULY 8, 2009*

Important Notice: If you completed the transfer form, your account will be operational prior to the implementation of new NFA regulations. You will be notified via e-mail when your account is transferred.

Your account number and password will remain the same and your open positions will remain intact. Moving an account to FXCM UK involves some changes in deposit and withdrawal instructions, and changes in charges for transferring funds. However, FXCM UK clients have the option to send funds to the United States and fund via credit card. MYFXCM.com will also be available.

Deposits | Withdrawals | MYFXCM.com

If you have any questions about the new regulations or their effect on your risk management, please don?t hesitate to contact us at 1-888-503-6739, or e-mail us at info@fxcm.com.

* Please be advised that FXCM makes no guarantees as to the exact date of transfer. Accounts may not be transferred on their scheduled dates. In any event, clients will be notified via e-mail confirming the fact that their account has or has not been transferred at the scheduled time.

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@dragon33
No. I don't hedge. I forgot to add the title ("FIFO method, MT5 and reduced leverage for non-major pairs")... the post concerned about FIFO method of trading in that you have to close first position you open. So if you open A and then you open B you should close A first then B next. If I were to use hedging strategy I don't need to open two accounts with different brokers, simply open two accounts with the same broker. However, this beat the purpose of using less fund to hedge (remember that some brokers offer half to no margin at all to open a hedge position). So in essence, different type of money management should be used if you are going for two accounts (whether it be with the same broker or two brokers).

Also the margin policy will impact scalpers that uses high leverage with a very tight R:R. 100:1 is high leverage indeed, but I loved 200:1 (of course I know what I'm doing and been doin' it fine for quite sometime now). 25:1 for E/J is...(what word to describe this?) With Oanda, E/J is considered "major pair". However, we know that E/U and U/J are the majors (of course G/U and U/C too). That being said, I know that I will eventually have to deal with 100:1 or less when I have to switch to FXDD PT or CNX.

@Humble
it's good that I'm still with Alpari UK.

@PTG
you are correct, Sir. for the time being, this is where I consider the best spot to be (Alpari UK). Note: no, I'm not advertising them and not part of their staff. Just a satisfied client.